Ryanair Profits Beat Expectations

4th Nov 2003

Ryanair, Europe’s No.1 low fares airline today (Monday 3 Nov 2003) released financial results for the half year ended 30th September 2003 showing record profit and traffic growth, whilst passing on fares that are 12% lower than the equivalent period last year.

Traffic for the six months grew by 45% to 11.3m, average fares declined by 12% for the half year. Total revenues rose by 28%, operating costs rose by 32%, whilst after tax margins declined as predicted from 32% to 29% for the half year. Adjusted net profit after tax rose by over 16% to a record €175.5m.

“These results demonstrate another strong performance from Ryanair’s low fares model which continues to grow profitably in adverse market conditions across Europe. The strength of our traffic and profit growth, as well as the exceptional margins, once again proves our doubters wrong. As Southwest Airlines has proven for over 30 years, the low fares model (if properly implemented) works, it delivers extraordinary growth and exceptional profitability in an industry more often characterised by losses.

“During a period impacted by a war in Iraq, high oil prices, and a depressed economic environment in Europe, Ryanair has taken delivery of 18 new Boeing aircraft, acquired, restructured and relaunched Buzz, opened two new bases in Milan Bergamo and Stockholm Skavsta, and launched over 50 new routes.

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“Having increased seat capacity this Summer by over 50% and launched so many new routes it was inevitable that load factors would decline - as predicted - from last year’s record levels. Most of these new routes have performed extremely well and we are now running slightly ahead of our expectation of a 5% load factor decline for the year. Although yields continue to be softer than we expected we will continue to drive down fares in all markets, whilst offering more choice, better service and lowest ever prices to our customers.

“Of the two new bases this year Milan has, as expected, been the better performer this Summer. Load factors at the Stockholm base have been slightly lower, largely as a result of lower than expected load factors on the three intra-Scandinavian routes (Aarhus, Oslo, and Tampere) and we are in discussions with our partners at Stockholm Skavsta Airport which will see us either bring the performance of these routes up to acceptable load factors or alternatively replace them with new international destinations from Stockholm. Some of our new routes from Stansted this Summer, particularly to the low countries and one or two French destinations have also underperformed. Unless there is a significant improvement in load factors through the Winter, then we will replace a small number of these with alternative destinations and services, by selecting from some of the 50 new airports that we are currently in discussions with.

“We continue to meet and defeat attempts by our high fare flag carrier competitors to limit Ryanair’s growth, to block competition and lower fares in regional markets in Europe. In recent weeks an effort by SAS to block our operations at Aarhus has been dismissed; claims by Air Mediterranee that its traffic has declined as a result of Ryanair’s low fares services on the London-Pau route have been disproved by official CAA traffic statistics; attempts by Dusseldorf Airport and Lufthansa to block Dusseldorf designation for Niederhein Airport have been defeated and the Norwegian CAA has also thrown out complaints from SAS about Ryanair’s cost base at Haugesund.

“We continue to await a final decision of the European Commission on the Charleroi investigation, but remain confident that Commissioner de Palacio will put in place a framework that will encourage and enable publicly owned airports such as Charleroi and Strasbourg to compete on a level playing field with the many privately owned airports around Europe. These publicly owned secondary and regional airports must be allowed and encouraged to participate in the low fares, high growth, traffic and tourism revolution.

“At a time when the high fare flag carriers are entering into anti-consumer alliances around Europe, we believe the Commission is extremely focused on the fact that the development of Europe’s regions - and competition in air travel - depends on the growth of direct low fare flights. This is vital when the flag carriers are focusing on adding frequency and increasing prices on connecting flights across a small number of congested hub airports in Europe. The threat to consumers and air travel has recently been demonstrated by Britair/Air France’s return to a monopoly service on the Strasbourg-London route with same day return fares that start from a lowest price of almost €800 return from Strasbourg, a fare that is over 40 times more expensive that the lowest fare on sale from Ryanair for a similar itinerary.

“As always our focus in Ryanair continues to be on cost reduction. We are currently finalising negotiations with financial institutions for new and lower cost financing for some of our new 737-800 series deliveries. Going forward it will be Ryanair’s policy to own outright a majority of these aircraft, but to lease a significant minority. The next 10 aircraft for delivery in early 2004 will be financed under long-term low cost operating leases which benefit from Ryanair’s extremely low purchase price, resulting in highly competitive monthly lease rentals. The financing of a significant portion of Ryanair’s new aircraft deliveries in this manner over the coming years will significantly boost Ryanair’s cashflow and ensure that the airline continues to maintain a substantial net cash position on its balance sheet, allowing Ryanair to continue to be amongst the best financed airlines in the world.

“We remain dismayed at the continuing inactivity of the Irish Government in implementing its own election program to bring forward competition and low cost efficient facilities at the Irish airports. Costs at the three Irish airports, whilst not a material issue for Ryanair any more, will rise substantially next year. Access costs and fares to Ireland will rise in line with these totally unnecessary price increases at a time when Irish tourism is crying out for new routes and lower access fares.

“It is now over 12 months since the Government received 13 expressions of interest from a wide range of aviation companies to finance and build multiple competing terminals at Dublin Airport and still we have seen no action whatsoever to introduce this desperately needed competition. It is time the Irish Government “got real” and proceeded with its stated policy of breaking the airport monopoly into three competing companies and expedite the development of competing terminals at Dublin Airport.

“Looking forward for the remainder of the fiscal year, we remain confident that traffic growth will continue to be strong, but cautious about fares and yields. We expect that average yields will continue to decline by between 10% and 15% compared to those charged last year, and remain equally determined that Ryanair will continue to be the lowest fare airline in every market in which we operate. Accordingly we expect profits to grow materially, as we continue to maintain our margins in excess of 20%. The one key difference between Ryanair and all the other low fare imitators here in Europe is that only one airline - Ryanair - offers the lowest fares and has the lowest costs. Ryanair will continue to drive down costs and prices and by so doing, we will continue to replicate the success of other industry price leaders such as Southwest, Dell and Wal-Mart and deliver superior returns for shareholders.”

To celebrate these excellent results in traditional Ryanair fashion we are offering one million seats at just £1 each (plus taxes and charges). This offer is available for sale immediately on www.ryanair.com on all routes from London with seats available every day of the week. Booking must end at midnight on Thursday so book early as demand is bound to be very strong for this phenomenal offer. Don’t give up the day job - just take a £1 getaway with Ryanair!